Government shutdown would stall FHA loans

by Ryan Smith30 Sep 2013

A government shutdown would halt the processing of Federal Housing Administration-backed mortgages, according to a CNN report.

If Congress fails to raise the debt ceiling, triggering a shutdown, applications for loans guaranteed by the FHA, the Veterans Administration and the Department of Agriculture wouldn’t be processed until after the shutdown ends, according to CNN. Nearly half of all home mortgages in 2012 were FHA loans, CNN reported.

If the government shuts down, “FHA will be unable to endorse any single-family loans and FHA staff will be unavailable to underwrite and approve new loans,” according to the Department of Housing and Urban Development. Such an eventuality wouldn’t be good for the housing market, said Mortgage Bankers Association CEO David Stevens.

“The housing market is searching for recovery, and we've been seeing signs of optimism,” Stevens told CNN. “This could have a sizable impact on the recovery.”

Mark Zandi, chief economist for Moody’s Analytics, told CNN that Congress needed to reach an agreement to avoid the shutdown.

“The effects of a shutdown would be so dark, I can't believe the legislators would not come to terms to end it,” Zandi said.



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